Trent‘s share price has been on a bullish ride at the bourses in the past year. The company has also backed the surge in shares with steer financial performance that has impressed several analysts. However, analysts at HDFC Securities advise caution with the stock going forward.
The Trent Analyst: The Jay Gandhi-led analyst team at HDFC Securities maintained the “sell” rating for the stock with a price target of ₹2,330. The target implies an around 40% downside from the stock’s last closing price of ₹3,673.20.
The Trent Thesis: The brokerage pointed out that amid a slowdown in the apparel sector, Trent stands out as an exception. Its standalone revenue witnessed a remarkable 52.5% year-on-year growth, reaching ₹3,312 crore, surpassing the brokerage’s expectations of around ₹3,000 crore.
Zudio continued to anchor the company’s growth, with Star recording a robust 26% year-on-year increase in the second quarter, predominantly driven by same-store sales growth (SSSG).
The analysts pointed out that despite the increasing contribution of Zudio, a low gross margin business, to the revenue mix, Trent managed to expand its standalone gross margin by 57 basis points year-on-year to 46%, exceeding projections of around 44%.
Benefiting from scale-led operating leverage advantages, Trent witnessed a significant expansion in its EBITDA margin, which grew by 336 basis points year-on-year to 18.8%. Consequently, reported EBITDA surged by 86% year-on-year to ₹623 crore outperforming analyst estimates of around ₹473 crore.
The domestic brokerage firm added that Trent continues to run circles around peers in terms of growth and has disciplined management and a well-capitalised balance sheet. However, the company’s current valuation seems too expensive, as per the analysts.
Price Action: Trent’s share price was down 4.28% to trade at ₹3,677.70 in early trade on Friday.
Don't miss a beat on the share market. Get real-time updates on top stock movers and trading ideas on Benzinga India Telegram channel.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.